Consumer agency probe finds ‘toxic’ environment

An internal investigation at the Consumer Financial Protection Bureau last year concluded that an agency supervisor allowed an employee to be harassed by colleagues, a symbol of what the probe said was a “toxic workplace” in one part of the agency.

The probe, denounced by the agency itself as biased and based on anonymous sources, is likely to fuel Republican efforts to restructure the consumer agency, created by the 2010 Dodd-Frank law enacted after the 2008 financial crisis.

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The 29-page report, first obtained by POLITICO on Friday, will be at the center of a House Financial Services Oversight Subcommittee hearing next week, chaired by Rep. Patrick McHenry (R-N.C.). In addition to validating the employee’s claims, the outside investigator hired by the consumer agency said there was a hostile work environment in one division.

“I found that the general environment in Consumer Response is one of exclusion, retaliation, discrimination, nepotism, demoralization, devaluation, and other offensive working conditions which constitute a toxic workplace for many of its employees,” Investigator Misty Raucci will say in her opening remarks.

The CFPB is aggressively pushing back on the findings. A spokesman said the report is not valid or credible, in part because it took unsworn statements by anonymous witnesses and failed to give those accused a chance to properly respond.

Agency spokesman Sam Gilford said that while the bureau hired an outside firm to conduct a “neutral” and “unbiased” study, he said the report failed to meet the agency’s standards.

The bureau hired the outside investigator last year after Angela Martin, a lawyer in the bureau’s enforcement division, complained that her supervisor retaliated against her after she filed a complaint of gender discrimination against another employee. She charged that her position has subsequently suffered as her supervisor has purposefully marginalized her.

While the names of some employees were redacted, others were not. The identity of the supervisor in question — Scott Pluta, the agency’s assistant director of the office of consumer response — was previously unreported.

Raucci concluded after a six-month investigation that Pluta allowed Martin to be subject to “relentless hostility” from another CFPB official, Dane D’Alessandro.

“Mr. Pluta did little, if anything, to curtail Mr. D’Alessandro’s continued open bashing, bullying, and marginalization of Ms. Martin,” Raucci will say at next week’s hearing, according to her opening statement.

The report said Pluta took over her supervision of subordinates, gave her a poor performance review and ultimately removed her from her position as chief counsel of the division.

D’Alessandro could not be reached for comment. Pluta called the accusations false.

“The allegations of Ms. Martin and the investigator are patently false,” Pluta said in a statement. “I am hopeful that the committee will allow me the opportunity to testify at Wednesday’s hearing so that the truth can be known.”

The credibility of Ms. Martin could be an issue at the congressional hearing.

Separate documents obtained by POLITICO indicate that at least one of Martin’s subordinates asked to be removed from her supervision and transferred. The employee, who was pregnant at the time, said in a Feb. 2013 email to Pluta that she worried the stress caused by Martin’s “erratic behavior, mismanagement and seemingly hostile attitude towards me” could jeopardize her health.

CFPB spokesman Gilford questioned the methodology of Raucci’s probe.

“It is based upon unsworn statements of sometimes anonymous witnesses, the veracity and credibility of which cannot be tested,” Gilford said. “The investigator also failed to provide subjects an opportunity to address or respond to the witnesses and all of their allegations.”

Gilford added that the “anonymous allegations” leveled in the investigation could harm the reputations of employees who were not given the opportunity to respond to the claims.

“These are public servants who did not give their consent to have their personal information shared,” Gilford said. “It is extremely troubling that the one-sided allegations about another employee were made public.”

According to the bureau’s 2013 annual employee survey, the division rated higher than the rest of the agency as a whole in employee satisfaction.

The revelations came to light following a March 7 report in the American Banker that said white CFPB employees received higher ratings than minority employees on a rating scale the bureau uses to determine benefits, such as raises and bonuses.

Lawmakers requested more details about the bureau’s employee evaluation practices and grievances, and scheduled the April 2 hearing. The committee said Thursday that Martin and Raucci would both testify at the hearing.

In recommendations, Raucci said “remedial training alone would not be an adequate deterrent” to Pluta repeating his alleged behavior. Raucci also recommended that the CFPB address its underlying “corrosive environment” that is creating widespread morale problems at the agency.

CFPB’s M. Stacey Bach, assistant director of the Office of Equal Opportunity Employment, and Liza Strong, director of employee relations, were both invited to testify at the hearing next week. The bureau said Thursday that its officials will not testify because the hearing centers around an individual claim that deals with sensitive and personal information of employees.

Gilford said CFPB offered to have Bach and Strong brief the committee in private to protect employee privacy, but the committee declined. It also declined to hear from Stuart Ishimaru, CFPB’s assistant director for the office of Minority and Women Inclusion, Gilford said.

McHenry said it was “deeply troubling” that CFPB officials are refusing to testify at the hearing, but that it will go forward with or without the bureau’s cooperation.